Power sourcing cost for industries in Odisha to rise in future: Study

Industries in Odisha will have to pay higher price for sourcing power in Odisha due to the shift in the state's hydro-thermal power mix.

Listing the key challenges in the state's power sector, a report by the Asian Development Bank (ADB) foresees an increase in power sourcing cost, especially for the industries because of the ageing thermal and hydropower stations. Higher power sourcing cost for industries is slated to erode Odisha's competitive edge for investments. 

The state, with an average rate of Rs 4.20 per unit, boasts of the cheapest industrial power tariff when compared with other states such as Gujarat, Maharashtra, Rajasthan, West Bengal, Andhra Pradesh and Telangana.

The ageing thermal and hydropower stations in the state are currently the most competitive source of power. The ADB report warns that unless these ageing power stations are renovated or replaced, the dependence on costlier power from central generating stations would escalate. The challenge can be addressed by maintaining continuity of supply from existing sources of cheap power and evaluate sources within the state, which are relatively cheaper than central generating plants.

Besides, the high cross-subsidy surcharge impedes the ability of the industries to avail power under open access in the state and facilitate the revival of stranded co-generating plants (CGPs) and co-generation capacity. The existing cross-subsidy mechanism if followed by state power regulator Odisha Electricity Regulatory Commission (OERC) in the future years has the potential to led to a spike in tariff applicable to industrial consumers, the report pointed out.

The cost of power purchase in Odisha through an open access mechanism is significantly lower compared to other states but the cross-subsidy surcharge compared to the average industrial tariff is amongst the highest in Odisha and 20 per cent more than the cap suggested in the National Tariff Policy, 2016.

Over the past five years and in the future, the power sales mix in the state will undergo a significant change, that is, industry's consumption (subsidising category) as a percentage of total consumption will decline from about 41 per cent in FY2016 to about 30 per cent in FY2025 while domestic consumption (subsidised category) as a percentage of total consumption will increase from about 36 per cent in FY2016 to about 51 per cent in FY2025.

"It is imperative for OERC to rationalise the tariff to reflect the actual cost of supply applicable to various consumer categories to ensure that the declining subsidising categories of consumers (especially industrial and commercial) are not overly burdened due to cross-subsidization attributable to the surging subsidized categories of consumers (especially domestic)", the report suggested.